Podcast Summary: "Any Benefit to Actively Managed 401(k)?"

Podcast Information:

• Title: Jill on Money with Jill Schlesinger
• Host/Author: Audacy
• Description: Host Jill Schlesinger, CFP®, addresses challenging and sometimes controversial financial and investing topics without the jargon, aiming to uncover essential insights and provide actionable information. Each week, Jill engages with listener questions and interviews informative guests to help listeners maximize their financial well-being.
• Episode Title: Any Benefit to Actively Managed 401(k)?
• Release Date: July 2, 2025

Introduction

The episode "Any Benefit to Actively Managed 401(k)?" delves into the efficacy and value of actively managed 401(k) plans. Jill Schlesinger addresses listener queries, offers professional insights alongside her co-host Mark Schlesinger, and provides practical advice on various financial topics ranging from retirement accounts to real estate investments.

Listener Questions and Expert Analysis

1. Actively Managed 401(k) Plans

Listener: Eileen
Timestamp: [01:03] - [03:31]

Question:
Eileen is hesitant about her financial advisor's recommendation to hire Future Capital to manage her $1 million 401(k), which would cost her $275 per month. The advisor claims that constant management could increase returns by 2-4%.

Discussion:
Jill and Mark express strong skepticism regarding the advisor's recommendation. Jill dismisses the idea of constant management, stating, “This is nonsense. There's no way you should do this” ([02:53]).

Insights:

• Cost vs. Benefit: The high fees ($275/month) may not justify the marginal return increase (2-4%).
• Advisor Trustworthiness: Such recommendations may raise red flags about the advisor's motives and the suitability of the strategy for the client's financial situation.
• Recommendation: Jill advises Eileen to reject the proposal, emphasizing the importance of understanding all aspects of her financial plan and consulting further if necessary.

2. Purchasing a Cottage in Ireland

Listener: Deirdre
Timestamp: [03:29] - [04:53]

Question:
Deirdre is considering buying a traditional cottage in Ireland with her sister. She owns an NYC co-op worth $500,000 (paid off) and has access to $50,000 in cash and $60,000 in her Roth IRA in two and a half years. She seeks advice on financing the $150,000 to $200,000 cottage purchase and whether it is a good investment.

Discussion:
Jill finds the idea appealing but cautious, highlighting the need for more information about Deirdre and her sister's financial situations. She questions the use of Roth IRA funds for such a purchase and suggests exploring home equity loans or consulting an Irish bank for a mortgage.

Insights:

• Investment vs. Dream: Jill differentiates between purchasing for personal fulfillment versus purely as an investment, suggesting that the latter is generally not advisable.
• Financial Impact: Using retirement funds could jeopardize long-term financial security, especially if not thoroughly planned.
• Recommendation: Consult an estate attorney to navigate the complexities of gifting, transferring deeds, and understanding the tax implications.

3. Social Security Benefits Timing

Discussion:
Jill addresses concerns raised in her article "Social Insecurity 2033," discussing the potential 23% reduction in Social Security benefits if Congress does not act by 2033.

Insights:

• Claiming Benefits Early: Jill advises against taking Social Security benefits at age 62 if not immediately necessary due to permanent reductions.
• Future Uncertainty: If the system undergoes further cuts, delaying benefits could mitigate the impact of reductions.
• Recommendation: Wait as long as possible to maximize benefits, considering personal financial needs and system sustainability.

4. Roth IRA Conversions for Retirees

Listener: Angela
Timestamp: [04:53] - [09:42]

Question:
Angela, 70 years old and recently retired, holds $1.2 million in a traditional IRA, $550,000 in a brokerage account, and $50,000 in a Roth IRA. She is concerned about the tax implications of her traditional IRA and wonders if converting to a Roth IRA is feasible and advantageous.

Discussion:
Mark suggests a cautious approach, advising against converting the entire amount at once to avoid significant tax liabilities. Instead, he recommends partial conversions over several years. Jill adds that Angela is in the 22% tax bracket and could consider incremental strategies to manage taxes effectively.

Insights:

• Tax Management: Converting large sums can push taxpayers into higher tax brackets, increasing their tax burden.
• Strategic Conversion: Partial conversions spread over time can optimize tax liabilities and preserve liquidity.
• Recommendation: Implement a phased conversion plan, withdrawing manageable amounts each year to balance tax implications and financial needs.

5. Assisting a Retired Sister with Relocation

Listener: Barbara
Timestamp: [09:42] - [14:39]

Question:
Barbara wants to help her retired sister relocate from Florida to a northern state. The Florida house is valued at $125,000, while a suitable northern house costs $200,000. Barbara is unsure whether to buy the northern house outright and transfer the deed or provide funds as a gift.

Discussion:
Jill advises Barbara to consult with an estate attorney to navigate the legal complexities of transferring property or funds. She emphasizes the importance of formal agreements to avoid future tax complications and ensure both parties are protected.

Insights:

• Legal Considerations: Transferring property or large sums of money involves legal documentation to prevent misunderstandings and tax issues.
• Financial Planning: Ensuring that the gift does not negatively impact Barbara’s financial stability is crucial.
• Recommendation: Engage an estate attorney to structure the assistance properly, whether through direct property transfer or financial gifting.

Listener Feedback

Listener: Natalie
Timestamp: [14:39]

Comment:
Natalie shares her positive experience from a previous episode where Jill and Mark assisted her and her husband with financial planning, leading to improved financial and emotional well-being. She expresses gratitude and looks forward to further guidance as they plan for future financial moves.

Response:
Jill and Mark thank Natalie, highlighting the importance of community and peer support in financial journeys. They encourage other listeners to reach out and share their stories, fostering a supportive environment.

Conclusion

In "Any Benefit to Actively Managed 401(k)?", Jill Schlesinger provides thoughtful and practical advice on managing retirement accounts, navigating real estate investments, optimizing Social Security benefits, and assisting family members financially. The episode emphasizes the importance of informed decision-making, professional consultations, and strategic financial planning to ensure long-term financial security and personal fulfillment.

Notable Quotes:

• Jill on Eileen’s 401(k): “This is nonsense. There's no way you should do this” ([02:55]).
• Jill on Deirdre’s cottage purchase: “I don't think most people should do these things as investments. I think you should do that to make a dream come true” ([04:53]).
• Mark on Angela’s Roth conversion: “I don't really want to soak up all of her liquidity” ([09:30]).
• Jill’s advice on Social Security: “If Congress does not act, there will be an across the board 23% reduction in all benefits” ([04:53]).

Final Thoughts: This episode underscores the significance of critically evaluating financial advice, understanding the long-term implications of investment decisions, and seeking professional guidance when navigating complex financial landscapes. Jill and Mark Schlesinger empower listeners to make informed choices that align with their personal financial goals and circumstances.